Stock Market News

Europe open: Stocks hold their ground, save in Italy

05-03-2018 08:13

European stocks have started the morning higher, save in Italy, where election officials are still counting the results of Sunday's ballot, which appear to indicate the country's main anti-establishment parties came away with half of the votes
Also weighing on sentiment, on Saturday US president Donald Trump threatened to target European carmakers with additional levies if Brussels retaliated against the White House's new tariffs on aluminium and steel.

"This all makes it very difficult for investors to know what to do. Any global company could instantly and significantly suffer if its principal products suddenly become subject to retaliatory trade restrictions," said Rebecca O'Keeffe at Interactive Investor.

As of 0825 GMT the benchmark Stoxx 600 was trading 0.30% or 1.11 points higher at 368.09, alongside a 0.18% or 9.01 point gain on the Cac-40 to 5,145.75, while Spain's Ibex 35 was adding 0.18% or 17.10 points to 9,546.30.

Meanwhile, the yield on the benchmark 10-year Italian government bond was one basis point higher to 1.98% and that on similarly-dated Spanish debt down by three basis points at 1.52%.

Commenting on the results of the parliamentary elections in Italy, economists at Berenberg said: "The outlook for further pro-growth reforms in Italy looks dim for now. Instead, Italy could be heading for partial reform reversals and an increase in public spending that may lead to some conflict with Italy's partners in the EU.

"If the 5Stars focus more on their anti-corruption drive than their expensive spending promises, the outlook may be less concerning."

But it wasn't all bad news at the start of the week.

Also on Sunday, it was announced that 66% of the German SPD party's voters had backed forming a grand coalition with Chancellor Angela Merkel's CDU/CSU, putting an end to the longest political impasse in modern German history.

Significantly, the coalition programme called for a focus on domestic issues and euro area reforms.

Nonetheless, economists at Barclays Research cautioned that: "any reform requiring either implicit or explicit German fiscal backing, such as debt mutualisation or the establishment of a euro area Finance Minster with an independent budget, seems unlikely in our view.

"Any such reform would also need support from all member states and, following Prime Minister Rutte's remarks on Friday, the Netherlands would likely oppose it."

On the economic calendar for later in the day, IHS Markit was set to release its 'final' euro area purchasing managers' indices for January at 0900 GMT, followed by euro area retail sales data for the month of January from Eurostat at 1000 GMT, alongside fourth quarter Greek GDP figures from ELSTAT.

In the corporate space, France's Axa agreed to buy American property and casualty peer XL Group for about $15.3bn in cash, for a 33% premium versus XL's closing price on Friday.

Airbus will move to slash its headcount by 3,600 people in the wake of lower rates of production for its A380 and A400M models.

At the weekend, Siemens announced a pricing range for the upcoming initial public offering of its Healthineers unit of between 26 and 31 a share, for a total valuation ranging from 26-30bn.